Performance growth has slowed slightly. In the first half of 2024, revenue was 13 billion yuan, up 3.3% year on year, and net profit to mother was 4.1 billion yuan, up 4.0% year on year. Among them, single-quarter revenue for the second quarter decreased 0.9% year over year, and net profit to mother increased 2.3% year over year.
The pace of scale expansion has slowed, and net interest spreads have narrowed, but the absolute level is still at a good level in the industry. Net interest income in the first half of the year fell 0.6% year on year, with a single quarter decline of 4.9% in the second quarter, dragged down by the slowdown in scale expansion and the narrowing of net interest spreads. Total assets at the end of the period were 1.09 trillion yuan and total loans were 0.53 trillion yuan, up 11.7% and 9.9% year-on-year respectively. The growth rate declined slightly, in line with industry trends. The net interest spread disclosed by the company for the first half of the year was 2.12%, down 22 bps year on year, down 19 bps from the full year of 2023, mainly driven by the decline in asset-side returns. On the asset side, the yield on loans in the first half of the year was 5.31%, down 47 bps year on year. The yield on interbank investment and bond investment both declined year on year, leading to a 32 bps drop to 4.34% year on year. On the debt side, along with the reduction in interest rates on deposit listings and the company's active pressure on high-cost liabilities, the cost of debt has declined, but since deposits have become regular, the reduction in debt costs has been limited. The deposit cost ratio in the first half of the year was 1.88%, down 16 bps year on year, and the cost of interest-bearing debt was 2.07%, down 12 bps year on year.
The financial development trend in the county is relatively good, deepening the transformation of large-scale retail. The company focuses on “realising the county area” and continuously upgrades innovative business models and specialty products. On the basis of full coverage of the Hunan county network, grid management in the county area has been implemented, and the “Liangxiang” product and “online+offline” combination model have been optimized. At the end of the period, the company's retail customer base in the county area was 6.47 million households. The county deposit balance increased by 5.15% compared to the beginning of the year, and the county loan balance increased by 14.29% compared to the beginning of the year. The major retail business improved steadily. The number of retail customers at the end of the period reached 18.06 million, up 2.1% from the beginning of the year, and managed retail AUM reached 427.7 billion yuan, up 6.9% from the beginning of the year.
Defect rate indicators are stable, but overdue rates and attention rates have increased. The year-end defect rate was 1.16%, up 1 bp from the end of March. The estimated annualized bad generation rate for the first half of the year was 1.15%, an increase of 7 bps over the previous year. The final attention rate was 2.26%, and the overdue rate was 1.98%, up 44 bps and 45 bps, respectively, from the beginning of the year. The company's provision schedule was stable, with a provision coverage rate of 312.8% at the end of the period, down 1.4 percentage points from the beginning of the year.
Investment advice: Due to the large decline in asset-side returns, the trend of periodization of debt-side deposits was not effectively mitigated. We lowered our 2024-2026 net profit to 78.2/84.2/91.8 billion yuan (originally forecast 81/89.6/99.8 billion yuan), corresponding to a year-on-year growth rate of 4.7%/7.7%/9.0%. The current stock price corresponds to the 2024-2026 PE value of 3.8x/3.6x/3.3x, and the PB value is 0.45x/0.41x/0.37x, maintaining a “neutral” rating.
Risk warning: Macroeconomic recovery falls short of expectations and will drag down the company's net interest spreads and asset quality.